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Security a Is a One-Year Maturity Bond with a Coupon

Question 40

Multiple Choice

Security A is a one-year maturity bond with a coupon rate of 10% and a face value of $2,000; Security B is a consol that pays $200 for each year you own it.If the market interest rate falls from 10% to 5%, by how much do the values of these two securities change?


A) the value of A increases by $95; the value of B increases by $2,000
B) the value of A increases by $95; the value of B increases by $1,000
C) the value of A increases by $100; the value of B increases by $100
D) the value of A increases by $200; the value of B increases by $1,000
E) the value of A increases by $200; the value of B increases by $2,000

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